Canadian Depositary Receipts

And my contact responded - it is effectively as I outlined:

- backed by actual stock
- fractional share ownership
- he FX you’re getting is in effective institutional rates vs. the traditional retail
- currency hedged

"CDRs are modelled after the US ADR business, but with a few important adjustments:

Similar to ADRs – which bring foreign company’s shares to US exchanges to make it easier for US investors to buy foreign listed stock as they trade in USD, CDRs will do the same for Canadians
CDRs are bringing some of the largest companies to the NEO Exchange in Canadian dollars
Typically an ADR will be brought to the US with a fixed ratio (i.e. 1 for 10 shares) – this can enable some element of fractional share ownership; CDRs will do the same e.g. Amazon trades >$3600; the CDR will trade at ~$20
What is different:
In an ADR, you usually also own the currency between the USD and whatever foreign market the company’s shares originally traded on.
With CDRs, there is a currency hedge that will all but eliminate the FX risk so you can “own the company, not the currency” to use CIBC’s tag line

Amazon’s up first. Google, Apple, Netflix, Tesla up next with a lot more to come."

Hey Christian,

This is a brand new product that is being launched by CIBC. It is modelled after the ADRs in the states, whereby it provides an ability for Canadians to invest in global equities directly on a Canadian exchange and in Canadian dollars. Per the CIBC news release:

"Offered at a fraction of the price per share of the underlying reference share, and with a built-in notional currency hedge, CDRs provide investors with affordable access to foreign stocks while mitigating the currency risk associated with global investing.

The first CDRs that will be available for trading on the NEO Exchange are listed below, with many more planned for the future:

Alphabet Canadian Depositary Receipts (CAD Hedged) – GOOG
Amazon.com Canadian Depositary Receipts (CAD Hedged) – AMZN
Apple Canadian Depositary Receipts (CAD Hedged) – AAPL
Netflix Canadian Depositary Receipts (CAD Hedged) – NFLX
Tesla Canadian Depositary Receipts (CAD Hedged) – TSLA"

In essence, it is like buying fractional shares of these companies which will be backed by actual stocks to be held in custody by the Bank of New Your Mellon, CIBC's partner in this endeavour.

They are trying to make global equities more accessible to Canadians by making it easier for them to purchase. I'd expect these CDRs to move in lockstep with their respective share price. So, if AMZN moves by 2%, I'd expect the CDR to move accordingly. I have an email in to my NEO contact to confirm, but this is how I am interpreting it currently. CDRs are brand new and don't currently exist on the Canadian markets.

Mat